KappAhl improves in Q3 after earlier decline, e-tail soars

Swedish Fashion retailer KappAhl may have seen plenty of upheaval in recent periods, but its performance seems to be improving and Q3 delivered reasonably good news with the company saying that it’s “back on track”.

KappAhl

Q3 started slowly but sales built up gradually and May was strong, the retailer in the middle of a turnaround said.

The company added that “attractive campaigns and an efficient supply chain have contributed to fewer clearance sales and a sound gross margin,” and said that its spring offer was “well-received and well-coordinated” while pre-summer was “very well received”.

Not that its sales figures showed massive leaps (apart from e-commerce) but the steady progress it's made is a good sign that it's starting to get things right.

Sales in Q3 rose 2.1% to SEK1.24 billion, with like-for-like sales up by 2.7%. And while online sales still only account for 4.5% of its total turnover, this figure should rise rapidly if it continues on its current growth trajectory. That's because e-commerce sales were up an impressive 40% during the latest quarter.

There was good news on margins too as the gross margin rose to 64.5% from 63.7%. This boosted earnings with operating profits reaching SEK121 million, up from SEK119 million a year ago. Cost controls also helped that figure.

The extent of the company's improvement in the latest quarter was highlighted by contrasting the positive figures in Q3 with its nine-month numbers, which cover the period from September up until May. Here the news was less encouraging. Overall sales for the nine months fell 4% to SEK3.52 billion, while margins didn't budge and operating profits plummeted to SEK216 million from SEK310 million.

Perhaps it's no surprise that's the company's CEO exited recently given the performance during the autumn and winter season, although the spring and early summer improvements shows that some of the measures Danny Feltmann put in place are certainly working.

Acting CEO Göran Bille said on Wednesday that “a range that continues to be attractive, [plus] well-coordinated campaigns and a well-managed supply chain will lead to maintained high quality of sales.”

KappAhl has 369 stores, with Sweden its biggest market, although it also has a sizeable presence in Norway, Finland, and Poland, and now has five UK Newbie locations.

​Under-pressure KappAhl was upbeat on Wednesday as it reported higher Q1 sales, and said it outperformed the market, even as margins dipped, profits fell and it had to invest more time and money in driving sales upwards.

​The management changes are continuing at KappAhl with the board on Friday naming its CFO Peter Andersson as acting CEO until the new President and CEO, Elisabeth Peregi, assumes her position during the spring of 2019.